At the Beginning of the Current Year, Taunton Company's Total

question 52

Multiple Choice

At the beginning of the current year, Taunton Company's total assets were $248,000 and its total liabilities were $175,000. During the year, the company reported total revenues of $93,000, total expenses of $76,000 and owner withdrawals of $5,000. There were no other changes in owner's capital during the year and total assets at the end of the year were $260,000. Taunton Company's debt ratio at the end of the current year is:

• A) 70.6%.
• B) 67.3%.
• C) 32.7%.
• D) 48.6%.
• E) Cannot be determined from the information provideD.If total assets were $248,000 and total liabilities were $175,000, total equity was $73,000 at the beginning of the period. Add to that figure $93,000 of revenues during the year and subtract $76,000 of expenses and $5,000 of withdrawals during the year and equity obviously ended the year at $85,000. If total assets at the end of the year were $260,000 and total equity was $85,000, total liabilities were $175,000. Thus, the debt ratio was $175,000/$260,000 = 67.3%.

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Definitions:

Systematic Desensitization

is a behavioral therapy technique used to reduce phobias and anxieties by gradually exposing the patient to the anxiety source or its context without the intention to cause any harm.

Cognitive-Behavioral Therapy

Cognitive-behavioral therapy is a form of psychological treatment that addresses maladaptive thinking patterns to improve emotional regulation and develop personal coping strategies.

Free Association

A psychoanalytic technique in which a patient says whatever comes to mind without censorship, used to uncover subconscious thoughts and feelings.

Psychoanalytic

A therapeutic approach and theory of personality development that emphasizes unconscious motives and conflicts, originally developed by Sigmund Freud.